SHFE Lead Fell Below 15,000 yuan/mt and the Downstream Purchased as needed

SHANGHAI, July 5 - Futures: LME lead opened at $1,937/mt and closed at $1,945/mt overnight, up 0.78%, after hitting the lowest point of $1,909.5/mt and the highest point of $1,960/mt. 

The most-traded SHFE 2208 lead contract opened at 15,045 yuan/mt and fell to 14,955 yuan/mt in the early stage, but then rebounded and closed at 15,025 yuan/mt amid the increase of LME lead, a decrease of 0.13%.

Spot fundamentals: Chihong lead in Shanghai market quoted at 15,020-15,030 yuan/mt, in discounts of 30-20 yuan/mt over over the SHFE 2207 lead contract. Henan JINLI GOLD and LEAD Group, Jiangxi Copper Group and Nanfang in Zhejiang market quoted at 15,010-15,030 yuan/mt, in discounts of 40-20 yuan/mt over SHFE 2207 lead contract. Lead futures congested around 15,000 yuan/mt and cargo holders quoted based on the market prices. Some downstream picked up goods as needed while some traders purchased on dips. In this case, the retail transactions were active. In terms of secondary refined lead, the enterprises quoted flat from last Friday and some enterprises quoted in discounts of 150-100 yuan/mt over the SMM secondary refined lead prices. However, the downstream enterprises were less willing to purchase as SHFE 2208 lead contract continued to rebound. Therefore, the spot transactions decreased. According to some smelters and traders, the spot transactions were modest.

In terms of inventory, as of July 4, the social inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin was 83,000 mt, down 1,500 mt from last Friday (July 1) and 1,200 mt from last Monday (June 27).

Lead price forecast: On the macro front, the US dollar index remain volatile amid the weak US economic data. The market still worried about the global economic recession, and attention should be paid to the further guidance from this week’s Federal Reserve meeting minutes and non-farm data. In terms of domestic fundamentals, the continuous decline of LME lead brought opportunities for the imported lead concentrates. Therefore, the tight domestic lead concentrate supply may ease slightly. At the same time, the supply of lead ingots increased steadily and the regional supply differences gradually narrowed. In terms of the consumption, the operating rates of lead-acid battery improved. However, as the downstream battery companies still mainly purchased as needed, the spot transactions were still poor and the discounts changed little from last Friday. Overall, as the enthusiasm for delivery in the trade market has not cooled down, the in-plant inventories and social inventories are expected to increase slightly. The lead prices may fall and test the cost line of secondary lead under pressure this week. Attention should be paid to the effectiveness of the cost support.

It is expected that the SMM1# lead price will decline 0-50 yuan/mt from yesterday.